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Gold rises as concerns over US stimulus dent risk appetite

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Gold rose on Wednesday after a steep fall in the previous session, as doubts about a stimulus package proposed by US President Donald Trump to soften the economic impact of the coronavirus epidemic weighed on risk sentiment.

[BENGALURU] Gold rose on Wednesday after a steep fall in the previous session, as doubts about a stimulus package proposed by US President Donald Trump to soften the economic impact of the coronavirus epidemic weighed on risk sentiment.

Spot gold rose 0.8 per cent to US$1,661.40 per ounce by 0548 GMT, having fallen nearly 2 per cent on Tuesday on hopes for global stimulus measures. US gold futures gained 0.1 per cent to US$1,661.80.

The White House and Congress negotiated measures on Tuesday to bolster the US economy and Americans' paychecks against the epidemic's impact, although there was no immediate sign of a deal.

"Risk sentiment has turned sour ... the market is pretty disappointed by Mr Trump's delay of the stimulus package, which he had promised on Tuesday," CMC Markets analyst Margaret Yang Yan said.

Asian shares and Wall Street futures fell as growing scepticism about Washington's stimulus package knocked the steam out of an earlier rally.

A central feature of the legislative proposal is payroll tax relief, although the extent and duration of the proposal were unclear.

Further supporting bullion, US 10-year Treasury yields drifted lower, resuming their march towards a record low touched on Monday, while the US dollar index also fell.

More than 116,000 people have been infected globally by the virus. Central banks, meanwhile, were seen stepping up efforts to combat the economic fallout of the epidemic, with the US Federal Reserve and Bank of England expected to cut interest rates this month. The Fed had already slashed its benchmark interest rate in an emergency move last week.

European Central Bank head Christine Lagarde will participate in a video conference of the EU's 27 leaders to discuss measures to counter the virus impact, the Council of the European Union said in a tweet.

Holdings in the world's largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, slipped 0.2 per cent to 962.03 tonnes on Tuesday, but were still near their highest in more than three years.

"ETFs are reflecting investment. We might have some inflows and outflows day to day but the overall increase is quite strong," said Soni Kumari, a commodity strategist at ANZ, adding that the lower interest rates environment and safe-haven demand were boosting inflows into ETFs.

Lower interest rate reduces the opportunity cost of holding non-yielding bullion. Elsewhere, palladium fell 0.8 per cent to US$2,401.04 per ounce, while platinum was up 0.6 per cent at US$874.28.

Silver rose 1 per cent to US$17.02 per ounce.

REUTERS